Insurers to adopt new accounting standards by 2027

MANILA, Philippines — The insurance sector has been ordered to adopt new accounting standards by 2027, according to the Insurance Commission.

In a circular, IC chief Reynaldo Regalado called on all insurers and reinsurers to adopt the Application of Philippine Financial Reporting Standard 17 – Insurance Contracts (PFRS 17) in their audited financial statements (AFS) and preparation of IC reportorial requirements.

The new accounting standard should be adopted at the onset of 2027.

“We recognize the need by insurers and reinsurers for additional time to prepare for the adoption of PFRS 17 in the presentation of their solvency reports,” Regalado said.

“At any rate, insurers and reinsurers are not precluded from adopting PFRS 17 as early as this year,” he said.

The additional leeway will allow the IC and other concerned agencies more time to ensure the “effective, proportionate, and well-coordinated adoption of the new accounting framework.”

The circular likewise provides that insurers and professional reinsurers shall submit reports outlining the status of their implementation of PFRS 17 until April 30.

They are also asked to submit affidavits of undertaking, which serve as formal declarations of companies’ commitments to implement the new accounting standard.

Quarterly PFRS 17 implementation status reports will also be submitted, indicating the preparatory activities undertaken, implementation risks, challenges and issues encountered, an assessment of PFRS 17 preparedness as well as the companies’ PFRS 17 accounting policies.

Further, the IC is asking insurers and reinsurers to submit quantitative impact assessment reports to ensure that all are conducted and reported in a timely manner.

The International Accounting Standards Board (IASB) prescribed on May 2017 the IFRS 17 for insurance contracts, providing for principles for the recognition, measurement, presentation and disclosure of issued insurance contracts in financial statements.

In 2018, the Philippines approved the local adoption of IFRS 17 as PFRS 17.

The new accounting standard introduces a more uniform and transparent approach to determine insurance contract liabilities using current values and risk adjustments.

“The eventual institutionalization of PFRS 17 will ensure prudential stability and sustainable growth. It will also consequently afford the insuring public sustained, if not increased, protection and confidence,” Regalado said.